“The shock is beyond belief, the whole world changes and very little is concrete anymore.”
These are the words of one of our clients, following his cancer diagnosis. Fortunately, he’d had the foresight to invest in critical illness cover, which meant he could focus on getting better, without worrying about his income.
Lots of people have insurance in place and the most common is life cover. There’s nothing wrong with that – everyone should consider what will happen to their family if they die – but statistically, it is the least likely policy to be used. You have a much greater chance of being unable to work for a prolonged period or suffering with a serious illness.
Despite its lifechanging benefits, critical or serious illness cover, as it is sometimes known, has received bad press, due to a perception that insurers dispute payments. However, policies are now vastly improved, with providers increasing the number of conditions covered and clarifying their definitions. In 2017, more than a billion pounds was paid out by insurers, representing 92% of claims. (Source: www.abi.org.uk)
Critical illness cover means you receive a lump sum payment if you are diagnosed with a pre-defined condition. The main causes of claims are cancer, heart attacks and strokes, but a myriad of other illnesses can be insured against.
We recommend Vitality as our provider of choice, as they offer wider coverage than most, including a severity-based policy that means a claim for 25%, 50% or 75% can be made earlier after diagnosis, when other insurers may require your illness to be more advanced before they will assist.
Although the majority of claims are paid, the type of policy you have is confusing for some. For example, if you are off work for six months with a bad back, you won’t be covered. That said, if you had an income protection plan instead, you could make a claim, as long as it had been set up appropriately.
This does what it says on the tin. For a monthly premium, income protection provides a predetermined amount of money, in the event you can’t work. It can be arranged to cover a set period of time and tailored to any budget, which makes it particularly useful if you are self-employed, because when you stop work, so do your earnings.
Family income benefit
It’s all very well paying off your mortgage, but what about other bills? How will your family cope if you do die?
I often find that Family Income Benefit is underused in financial planning. These policies provide a replacement income for a period of time, for example, it can be set up to pay out £1,000 a month, increasing with inflation, until your children reach 18.
Ask an expert
As you can see, the issue of life and illness cover is a complex one and professional advice is required to navigate it successfully. As part of our financial planning process, we will identify any shortfalls in your cover and work out how they can be best addressed.
I fully understand why cash strapped families consider cancelling policies like these when everyone is fit and well, but the benefits shouldn’t be underestimated.
Providers, like Vitality, also offer incentives to encourage you to stay healthy, including discounts on gym membership and other fitness and lifestyle brands, ranging from a free coffee to cinema tickets and spa days. This allows you to make the most of family life, whilst enjoying the peace of mind protection brings.
If you would like to discuss any of the policies outlined here in more detail, don’t hesitate to contact me. Telephone (01246) 298181 or email: firstname.lastname@example.org